TEI - New Jersey Chapter November 14, 2014 Scott Brian Clark, Esq

The leading Edge of State Tax Controversy:
Apportionment and Due Process
TEI - New Jersey Chapter
November 14, 2014
Scott Brian Clark, Esq.
Partner, Dentons US LLP
Chair: National State Tax Practice
914 843 3053
[email protected]
PART I: MTC Compact Litigation
A Lesson in Cost of Performance
PART II: Due Process - "Has it gotten
its groove back?"
PART III: Lessons Learned
Open Questions/ Issues
2
“SLICING A SHADOW”
“Allocating income among various taxing
jurisdictions bears some resemblance, as we
have emphasized throughout this opinion, to
slicing a shadow. In the absence of a central
coordinating authority, absolute consistency,
even among taxing authorities whose basic
approach to the task is quite similar, may just be
too much to ask.”
Container Corporation of America v. Franchise
Tax Board, 463 U.S. 159, 192 (1983)
3
“DOES THE MULTISTATE TAX COMPACT
MEAN WHAT IT SAYS? IS IT BINDING?
GILLETTE, California Supreme Court - pending
IBM, Michigan Supreme Court, July 14, 2014
LORILLARD TOBACCO COMPANY, Michigan
Court of Appeals, September 16, 2014
ANHEUSER-BUSCH, Michigan Court of Claims,
June 6, 2013, appeal pending.
HEALTH NET, Oregon Tax Court (Pending)
Texas Comptroller Decisions 106,508, 106,723,
107,192, & GRAPHIC PACKAGING Corp, v.
Combs.
4
THE MULTISTATE TAX COMPACT
IS IT BINDING?
The MULTISTATE COMPACT: "The Grand
Bargain" (August 1967) Is it binding? or is it just a
"model law" - Currently 16 full compact members.
(There are also Sovereignty Members and Associate
Members.)
Multistate Tax Compact Article I: Purpose
Facilitate proper & equitable determination of State
and local tax liability of multistate taxpayers,
Promote uniformity
Facilitate tax administration
Avoid duplicative taxation.
5
THE MULTISTATE TAX COMPACT
IS IT BINDING?
Multistate Tax Compact Article III - "Election
Provision"
Any taxpayer subject to an income tax . . . may
elect to apportion and allocate in accordance
with Article IV.
Multistate Tax Compact Article IV
All business income shall be apportioned based
on a three-factor formula (property, payroll &
sales).
6
THE MULTISTATE TAX COMPACT
IS IT BINDING?
The Grand Bargain" (August 1967)
•
History of the Compact - Goal: To address lack
of uniformity
. UDITPA (1957)
. Northwestern Cement v Minn (1959)
P.L. 86-272
. The Willis Report (1965)
•
"What did the MTC think
And when did they think it"
(Billy Hamilton, State Tax Notes, Dec 3, 2012)
•
"MTC - Institutional Memory
(Eugene Corrigan, State Tax Notes, Dec 17, 2012)
7
THE MULTISTATE TAX COMPACT
IS IT BINDING?
U.S. Steel Corp. v. Multistate Tax Comm'n
434 U.S. 452 (1979)
Issue: Did the Multistate Tax Compact violate
the compact clause of the Federal Constitution
(Art I, 10, cl 3) -- which provides that no state
shall, without the consent of Congress, enter into
any agreement or compact with another state or
with a foreign power
8
Holding: No
CALIFORNIA
THE GILLETTE COMPANY et al., v.
FRANCHISE TAX BOARD,
California Court of Appeals
October 2, 2012
ISSUE I - STANDING
ISSUE II - STATUTORY
CONSTRUCTION /
IS THE COMPACT BINDING?
9
THE GILLETTE COMPANY et al.,
v. FTB
FACTS: Section 25128 provided that:
"[n]otwithstanding Section 38006, all business
income shall be apportioned to this state by
multiplying the [business] income by a fraction, the
numerator of which is the property factor plus the
payroll factor plus twice the sales factor, and the
denominator of which is four . . . .”
(Former § 25128, subd. (a), as amended by Stats.
1993, ch. 946, § 1, p. 5441, emphasis added.)
10
THE GILLETTE COMPANY et al.,
v. FTB
LEGAL ISSUE:
As a matter of statutory construction, did the
Legislature’s choice of the “[n]otwithstanding
Section 38006” language in section 25128
overrode former section 38006, thus excising
the taxpayer option to use UDITPA, the
Compact apportionment formula.
11
THE GILLETTE COMPANY et al.,
v. FTB
HOLDING:
The Compact is a valid and enforceable compact
Contract clause of the United States Constitution
shields compacts form the impairment of states
California cannot unilaterally repeal the compact's
terms - Thus the Compact (Section 38006) trumped
Section 25128
FTB's construction runs afoul of the Constitutional
Reenactment Rule
12
THE GILLETTE COMPANY et al.,
v. FTB
Epilogue
California Supreme Court
On November 14, 2012 FTB filed appeal
On January 16, 2013, appeal is granted
Final briefs filed on January 2014
Awaiting Supreme Court oral argument date not set. Court has 90 days from oral
argument to decide.
13
THE GILLETTE COMPANY et al.,
v. FTB
Epilogue
Legislation
June 27, 2012, CA repeals the Multistate Tax
Compact and “clarified” that an election to use the
equally weighted three factor apportionment
formula provided in the Compact is not permitted in
California. The legislation also “clarified” more
generally that tax elections must be made on an
original, timely filed return, and are binding on the
taxpayer.
14
MICHIGAN
INTERNATIONAL BUSINESS MACHINES
CORP, v. DEPARTMENT OF TREASURY,
Michigan Supreme Court
July 14, 2014
(Gillette revisited)
15
IBM v. DEPARTMENT OF TREASURY
Facts:
IBM filed its Michigan Business Tax return for the tax-year
2008 and calculated both its Business Income Tax (BIT)
and Modified Gross Receipts Tax (MGRT) liabilities based
on a three-factor formula pursuant to MCL 205.581(1),
Michigan’s adoption of the multistate tax compact, which
provided that taxpayers “may elect to apportion and
allocate” their tax liability in accordance with a three-factor
formula specified in the Compact.
However, under MCL 208.1301(1) and (2), a different
apportionment scheme, based on single-factor sales
apportionment was provided.
16
IBM v. DEPARTMENT OF TREASURY
The Lower Court's Ruling:
(Statutory Construction/ Is the Compact Binding?)
Court of Appeals affirmed the decision of the trial
court holding that the Multistate Tax Compact's
election provision was repealed by implication by
the Michigan Business Tax (MBT) Act and that
IBM was required to calculate its tax liability for tax
year 2008 using the MBT's single-factor formula.
This decision is directly contrary to the decision of
the California court in Gillette.
17
IBM v. DEPARTMENT OF TREASURY
The Lower Court's Ruling (con't)
Similar to Gillette, IBM argued that the Compact is a
binding contract. Yet unlike Gillette the court disagreed
-- holding that a statute will not be deemed a contract
in the absence of exceedingly clearly-expressed intent
by the legislature. As the court stated, this would
require the legislature to specifically use the words
“contract” or “covenant” or to otherwise explicitly
“surrender its power to make such changes”.
With relatively little independent support, the court
somewhat summarily concluded that the Compact is 18
simply not a binding contract.
IBM v. DEPARTMENT OF TREASURY
Epilogue
IBM Litigation:
•
•
•
As it stood, the Gillette and IBM decisions conflict.
The IBM decision had not been published and so was
not binding.
12/28/2012 - IBM filed application for leave to
appeal.
19
IBM v. DEPARTMENT OF TREASURY
Epilogue
MICHIGAN SUPREME COURT (July '14) Holding: 3:1:3
Reversed - Victory to IBM on statutory grounds
"Because the legislature gave no clear indication that it intended
to repeal the Compact's election provision, we proceed under
the assumption that the legislature intended [it] . . . to remain
in effect. . . Thus, we believe the Michigan Business Tax Act
and the Compact are compatible and can be read as a
harmonious whole."
No repeal by implication
Michigan moves to reargue and asks for a stay of decision
pending decision on rehearing
20
IBM v. DEPARTMENT OF TREASURY
Epilogue
Michigan Legislation:
Effective January 1, 2012, the Michigan repeals the
Michigan Business Tax and replaces it with a Corporate
Income Tax, and at the same time eliminates the
Multistate Tax Compact three-factor apportionment
election beginning January 1, 2011,
21
IBM v. DEPARTMENT OF TREASURY
Epilogue
Related Cases:
130+ similar cases being held in abeyance
Estimated cost to comply with MI Supreme Court
Decision $1.1 billion (Michigan's estimate).
As a result In Public Act 282 of 2014, the Legislature
amended the Michigan Business Tax Act to
retroactively repeal the Multistate Tax Compact, MCL
205.581, art III(1). The Act expressly provides that
"MCL 205.581 to 205.589 is repealed retroactively and
effective beginning January 1, 2008." 2014 PA 282, 22
Enacting § 1.
LORILLARD TOBACCO COMPANY
V. DEPARTMENT OF TREASURY
Michigan Court of Appeals
Summary
Similar to IBM, Lorillard pending at the Michigan Court of
Appeals addresses the Compact election with regard to the
MBT.
Lorillard cites the state's prominent role in the development
of the Multistate Tax Compact, and specifically the role of
Bill (William) Dexter, a former Michigan assistant attorney
general who went on to become the Multistate Tax
Commissions’ General Counsel and who ultimately,
successfully argued that the Multistate Tax Compact is valid
and binding in United States Steel Corp. v. Multistate Tax
23
Comm, 434 U.S. 452 (1978).
LORILLARD TOBACCO COMPANY V.
DEPARTMENT OF TREASURY
Michigan Court of Appeals
(September 16, 2014)
Holding
Taxpayer wins, Court rules that IBM is dispositive
on the issue of whether Lorillard Tobacco Co.
could elect to use the evenly weighted three-factor
apportionment formula in the Multistate Tax
Compact.
24
ANHEUSER-BUSCH, v.
MICHIGAN DEPARTMENT OF TREASURY
MICHIGAN COURT OF CLAIMS
June 6, 2013
(appeal pending)
The Michigan Court of Claims holds that the Multistate
Tax Compact is binding on the state and may not be
modified by a conflicting statute
. . . but that the state's modified gross receipts tax is not
an income tax for purposes of the compact and so
cannot be apportioned under its terms
25
OREGON
HEALTH NET INCORPORATED AND SUBS,
v. DEPARTMENT OF REVENUE
Oregon Tax Court
(Oral Argument July 2014, Awaiting decision)
Summary
A case similar to Gillette, pending in the Oregon Tax Court.
Oregon adopted the Compact in 1967 and is still a full
member. In 1993 the state enacted Oregon Revised Statute
314.606 which indicates that when Oregon provides an
apportionment formula that conflicts with the Multistate Tax
Compact election, the state statute is controlling. Oregon
currently requires single factor apportionment.
26
HEALTH NET v.
DEPARTMENT OF REVENUE
Epilogue
Legislation (Oregon SB 307) repeals
and then reenacts all but the election
(Article III) and apportionment
(Article IV) sections of the Multistate
Tax Compact.
27
TEXAS
Comptroller Decisions 106,508, 106,723, and
107,192
Texas adopted the Multistate Compact in 1967
and is a full member. The Compact is codified
in Section 141 of the Texas Tax Code. Section
171.106(a) of the Code however, requires that
a taxable entity’s margin be apportioned to
Texas under a single factor formula based on
gross receipts.
28
TEXAS
Graphic Packaging Corp, v. Combs
353RD JUDICIAL DISTRICT COURT, TRAVIS COUNTY,
TEXAS (Filed 9/27/2012) Case Number: D-1-GN-12-003038.
Graphic Packaging is requesting refund of $1,019,122.
Issue: Whether Plaintiff is entitled to utilize the three-factor
apportionment formula described by Art. IV, Sec. 9, of
§141.001. Whether the single-factor apportionment formula is
violative of the Due Process Clause and the Commerce Clause.
Holding: January 2014, Taxpayer's motion for Summary
Judgment denied
29
A Lesson in - Cost of Performance
“WHAT IS THE INCOME PRODUCING ACTIVITY?”
TWO CASES -- SAME FACTS - TWO DIFFERENT
RESULTS:
AT&T CORP. V. COMMISSIONER OF REVENUE,
2011 Mass. Tax LEXIS 45 (Appellate Tax Board , June 8,
2011), affirmed, 82 Mass. App. Ct. 1106 (2012), review
denied, 463 Mass. 1112 (2012);
AT&T CORP AND INCLUDIBLE SUBSIDIARIES V.
DEPARTMENT OF REVENUE, 2011 Ore. Tax LEXIS
270, on appeal to Oregon Supreme Court, filed February
30
2012, oral argument March 2013, no decision yet.
THE INCOME APPORTIONMENT
SALES FACTOR
Both states apportioned based on a traditional
three factor formula
With respect to services -- the numerator of the sales factor
included services [i.e., included in “total sales” (MGL
c.63§38(f)), or “gross receipts” (ORS 314.665(4))]: “if the
income producing activity” was performed in-state: or if the
income producing activity was performed both within and
without the state, if the “greater proportion of the income
producing activity [was] performed in [the State]. . . based
on costs of performance.” [(MGL c.63§38(f)), (ORS
31
314.665(4)].
THE INCOME APPORTIONMENT
SALES FACTOR
QUESTION: With respect to interstate and
international telecommunication - Based on
its costs of performance, where did the
taxpayer incur the greater portion of its
income producing activity in respect of
interstate and international telephone calls?
. New Jersey
. Massachusetts
. Oregon
32
THE FACTS
Same years: 1996 through 1999
Identical refund claims: Refund claims filed to
eliminate from numerator of the sales
apportionment fraction the gross receipts from
interstate and international telecommunications
services
33
THE FACTS
AT&T is in the business of providing a national,
integrated telecommunications network operated and
managed from its Global Network Operations
Center (“GNOC”) located in Bedminster, New
Jersey
AT&T presented evidence detailing how transmission
signals were connected from one end of a transaction
to the other via AT&T's global, integrated network
AT&T demonstrated that it engaged in numerous
activities (so-called "core processes," . . . ) designed
to be 99.99% reliable at all times.
34
AT&T’S POSITION:
What is the "INCOME PRODUCING ACTIVITY”
The income producing activity should be
determined on an “operational” approach.
i.e., look to the entire integrated
telecommunications network, which it
operated and managed from the GNOC, and
NOT just to the part of the network located
in-state.
35
STATES' POSITION:
What is the "INCOME PRODUCING ACTIVITY”
Massachusetts and Oregon taxing
authorities took the position that the
income producing activity should be
determined on a “transactional”
call-by-call approach.
36
THE MA APPELLATE TAX BOARD
The MA Appeals Court agreed with AT&T that
the operational approach was the correct approach
to determine what is the income producing activity.
"AT&T could not have provided the long-distance
telephone calls to its customers without the
integrated long-distance network based in New
Jersey and other locations. . . [as a result] we
cannot conclude that this was an improper
application of the law or an unreasonable
application based on the facts presented."
37
THE OREGON TAX COURT
AT&T Loses: The Tax Court held
that the analysis for determining the
income producing activity began
(and essentially ended) with the
individual phone calls, i.e., the
transaction, rather than from the
operation of the
interstate/international
telecommunications network.
38
“THE TAKEAWAY”
States can and do take contrary
positions and reach divergent
decisions under substantially
similar facts and law.
39
PART II: Due Process - Has it
gotten its groove back?
40
Overview – Due Process and
Commerce Clause
Nexus
Due Process – 14th Amendment
Commerce Clause – Art. I, Sec. 8
Due Process
Jurisdiction over the taxpayer requires at
least a minimum connection between the
taxing state and a transaction, property,
or party. Mobil Oil (1982).
Commerce Clause Overview –
Article I, Section 8 of Constitution
Framework – Complete Auto test
(1) Substantial nexus
(2) Fair apportionment
(3) No discriminatory
(4) Fairly related
The Current Landscape
44
J. MCINTYRE MACHINERY, LTD. v. NICASTRO,
SUPREME COURT OF THE UNITED STATES
June 27, 2011
C/A: Due Process -- Products liability suit in NJ
SPLIT DECISION:
Plurality: Kennedy/ Roberts/ Scalia/ Thomas
Concurring: Breyer, Alito
Dissent: Ginsberg, Sotomayor, Kagan
45
J. MCINTYRE MACHINERY, LTD. v. NICASTRO,
SUPREME COURT OF THE UNITED STATES
June 27, 2011
FACTS:
•
•
•
•
•
P injured his hand in a metal-shearing machine
manufactured by D.
Accident was in NJ.
Machine Manufactured in England
At no time did the company either market or ship its
good into NJ
D did not sell its machines directly into the U.S., but
sold thru a U.S. distributor. [Only 1 - 4 machines
ended up in NJ.]
46
J. MCINTYRE MACHINERY, LTD. v. NICASTRO,
SUPREME COURT OF THE UNITED STATES
June 27, 2011
LOWER COURT: NJ Supreme Court says NJ has
Jurisdiction, Jurisdiction was proper due to:
-- Forseeability - Knew or reasonably should have known its
product would end up in NJ.
-- Invokes "steam of commerce" rational Ashi Metal Industry
D's placement of goods into the "stream of commerce"
with the expectation that they will be purchased by
consumers within the forum state may indicate
purposeful availment . . and purposeful direction of
activity into NJ.
47
J. MCINTYRE MACHINERY, LTD. v. NICASTRO,
SUPREME COURT OF THE UNITED STATES
June 27, 2011
THREE KEY FACTS:
Respondent's (Plaintiff's) claim of jurisdiction
centers on 3 key facts:
1. Distributor agreed to sell the machines in the U.S.
2. Company officials attended trade shows in several
states but not in NJ
3. No more than 4 machines ended up in NJ. (The
record suggests only 1.)
48
J. MCINTYRE MACHINERY, LTD. v. NICASTRO,
SUPREME COURT OF THE UNITED STATES
June 27, 2011
HOLDING: Reversed, NJ has no jurisdiction
Stream of Commerce ---- Yes
But No purposeful direction of activity
- No purposeful availment
- 3 key facts were not enough
- Noteworthy, that D had
- No office in NJ
- No employees in NJ
- No advertising in NJ
49
J. MCINTYRE MACHINERY, LTD. v. NICASTRO,
SUPREME COURT OF THE UNITED STATES
June 27, 2011
CONCURRING OPINION:
- None of our precedents finds that a single isolated sale even if
accompanied by the kind of sales effort indicated here, is
sufficient. Rather this Court's previous holdings suggest the
contrary. (citing WWVW and Asahi Metal)
- Requiring "something more" than simply placing a product into
the stream of commerce, even if defendant is aware that the
stream may or will sweep the product into the forum State.)
Fairness, Forseeability
50
J. MCINTYRE MACHINERY, LTD. v. NICASTRO,
SUPREME COURT OF THE UNITED STATES
June 27, 2011
Open Question - Tax Application:
1. Does Foreign Parent (MFG) have nexus in the U.S.
when it sells into U.S. thru U.S. Sub?
Or even when it systematically
engages a U.S. Distributor?
2. Is this different than
the Commerce clause
Substantial nexus test?
FC
US
51
GOODYEAR DUNLOP TIRES OPERATIONS, S.A., et al., v. BROWN et ux
SUPREME COURT OF THE UNITED STATES
June 27, 2011
C/A: Due Process -- Wrongful Death suit in
North Carolina State Court
UNANYMOUS DECISION
52
GOODYEAR DUNLOP TIRES OPERATIONS, S.A., et al., v. BROWN et ux
SUPREME COURT OF THE UNITED STATES
June 27, 2011
FACTS:
•
•
•
Decedents dies on bus accident outside Paris
as a result of tire blow-out
Parents allege negligence in tire construction
Suit filed in NC against GoodyearUSA,
Goodyear Luxembourg, Goodyear Turkey,
Goodyear France
53
GOODYEAR DUNLOP TIRES OPERATIONS, S.A., et al., v. BROWN et ux
SUPREME COURT OF THE UNITED STATES
June 27, 2011
LOWER COURT: NC Court of Appeals denied
Defendants Motion to Dismiss. (NC Supreme Court
denied discretionary review.)
Jurisdiction was proper due to:
-- Held that D had continuous and systematic
contacts with NC.
-- Tires made by D reached NC as a consequence
of a "highly-organized distribution process"
54
GOODYEAR DUNLOP TIRES OPERATIONS, S.A., et al., v. BROWN et ux
SUPREME COURT OF THE UNITED STATES
June 27, 2011
KEY FACTS:
Defendant's claim of NO jurisdiction centers on 4 key
facts:
1. No place of business, no employees, no bank
accounts, in NC.
2. D's do not design, mfg, or advertise in NC.
3. Do not solicit in NC.
4. Do not sell or ship tires to NC customers
5. Only contact -- Sale of tires sporadically thru
intermediaries
55
GOODYEAR DUNLOP TIRES OPERATIONS, S.A., et al., v. BROWN et ux
SUPREME COURT OF THE UNITED STATES
June 27, 2011
HOLDING: Reversed, NC has no jurisdiction
Stream of Commerce ---- Yes
But Stream of Commerce is not sufficient to
support General Jurisdiction as alleged here.
Defendant corporation's activity within NC was not
enough to support General Jurisdiction where
the suit is unrelated to that activity.
56
GOODYEAR DUNLOP TIRES OPERATIONS, S.A., et al., v. BROWN et ux
SUPREME COURT OF THE UNITED STATES
June 27, 2011
Open Questions:
Here - Only contact is sale of tires sporadically
thru intermediaries
But what if D solicited sales or sold directly on
a more regular basis?
57
GOODYEAR DUNLOP TIRES OPERATIONS, S.A., et al., v. BROWN et ux
SUPREME COURT OF THE UNITED STATES
June 27, 2011
Open Questions:
Is there a disconnect with tax?
What about the fact that affiliate (Goodyear
USA) is in NC? Would foreign affiliates be
subject to tax under an affiliated nexus std?
58
Open Questions (re: MCINTYRE & GOODYEAR)
1. DUE PROCESS: Does solicitation, or in-state sales or
use rise to the level of purposeful availment? (Due Process)
2. COMMERCE CLAUSE: Does solicitation rise to the
level of substantial nexus?
Amazon
What if make one email sale, thru affiliate for more than
$10,000??
59
IN THE MATTER OF SCIOTO
SUPREME COURT OF OKLAHOMA
May 1, 2012
FACTS: . . .
ISSUE: Taxation of Income from
VT Licensing Agreement
$$$$
WENDY's
Restaurants
WENDY's
International
OK
sub license
OK
SCIOTO
VT
Insurance
60
IN THE MATTER OF SCIOTO
SUPREME COURT OF OKLAHOMA
May 1, 2012
HOLDINGS: Oklahoma has no basis to tax
Scioto
"Due process is offended by Oklahoma's attempt to tax
an out of state corporation that has no contact with
Oklahoma other than receiving payments form an
Oklahoma taxpayer (Wendy's International) who
has a bona fide obligation to do so under contract
not made in Oklahoma"
(case reversed and remanded)
61
CONAGRA BRANDS, Inc.
SUPREME COURT OF WEST VIRGINIA
May 24, 2012
FACTS: . . .
ISSUE: Application of W. Va.
Corp Income & Franchise tax
to Royalty Income
ConAgra
Affiliates
(W. VA., etc.)
ConAgra
Foods
Intangibles
ConAgra
Brands
License Agreement
Nebraska
Third
Parties
(W. Va., etc.)
$$$$
($1 million)
62
CONAGRA BRANDS, Inc.
SUPREME COURT OF WEST VIRGINIA
May 24, 2012
FACTS: . . .
1. All Products bearing the trademarks and trade
names were mfg'd outside W. VA.
2. Licensor did not direct distribution of the
products themselves
3. Licensees themselves operated no retail stores
in W Va. but only sold the products to
wholesalers and retailers in W.Va.
63
CONAGRA BRANDS, Inc.
SUPREME COURT OF WEST VIRGINIA
May 24, 2012
HOLDINGS: W Va. has no basis to tax
ConAgra Brands
No jurisdiction under either Due Process
or Commerce Clause (substantial nexus)
64
CONAGRA BRANDS, Inc.
SUPREME COURT OF WEST VIRGINIA
May 24, 2012
Court cites: Geoffrey (S.C. 1993), KFC (Iowa
2010)
Taxpayer's presence satisfies neither "purposeful
direction" under Due Process, nor "significant
economic presence" under Commerce Clause
65
PART III: Lessons Learned
Open Questions/ Issues
66
PART III Lessons Learned: Open Questions/ Issues
(re: Conagra)
. Why Litigate? - case worth $77k (includes i)
for 2000 - 2003
. Is there any consistency in the case law?
Is Conagra consistent with MBNA?
There same court holds that "MBNA continuously
and systematically engaged in direct mail &
telephone and solicitation in W VA."
67
PART III Lessons Learned: Open Questions/ Issues
How do we reconcile these cases?
Transacting business with customers in state
Control over marketing and distribution in the
state
Purposeful availment
68
PART III Lessons Learned: Open Questions/ Issues
"Has the Due Process Clause Gotton It's Grove
Back" (Tax Analysts, June 4, 2012, Mary Benton &
Clark Calhoun) a.k.a. "Nexus Reset"
Renewed interest in Due Process
Forrest Gump -- Lessoned Learned: Always
argue both . . . you just never know what you're
gonna get.
69
PART III Lessons Learned: Open Questions/ Issues
Due Process ("Minimum Contacts") v.
Commerce Clause ("Substantial Nexus") -which is the higher standard?
How do these interact?
70
PART III Lessons Learned: Open Questions/ Issues
PRACTICAL TIPS:
Better understand your company's business
activities, relationships, and contractual
agreements with affiliates, contractors,
customers, etc.
Importance of affiliates licensees, etc.
Renewed focus on purposeful availment and terms of
statutes
71
PART III Lessons Learned: Open Questions/ Issues
PRACTICAL TIPS:
Consider VDA and Amnesty opportunities
Be careful about assertions that statutes
permit broad assertions
Does contesting jurisdiction subject you to
jurisdiction?
72
PART III Lessons Learned: Open Questions/ Issues
QUESTIONS ?
73
-- applause! -Scott Brian Clark, Esq.
Partner, Dentons US LLP
Chair: National State Tax Practice
914 843 3053
[email protected]

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